Outsourcing is nothing but contracting out to another company or person to do a particular function. Almost every organization out sources in some way. Typically, the function being outsourced is considered non-core to the business. A company, for example, might outsource its security operations to firms specialized in that work.. The outside firms that are providing the outsourcing services are known as service providers.
Although outsourcing has been around as long as work specialization has existed, in recent history, companies began employing the outsourcing model to carry out functions, such as payroll, billing and data entry. It is now a well-accepted fact that a process when outsourced to the right providers, tends to become more perfect and cost-effective.
Currently, outsourcing takes many forms. The most common forms are Information Technology Outsourcing (ITO) and Business Process outsourcing (BPO) & Knowledge Process Outsourcing (KPO).
The process of outsourcing generally involves four steps:
1) Strategic thinking, to develop the organization's philosophy about the role of outsourcing.
2) Evaluation and selection, to decide on the appropriate outsourcing projects and potential locations for the work to be done and service providers to do it
3) Contract development, to work out the legal, pricing and service level agreement (SLA) terms; and
4) Outsourcing management or governance, to refine the ongoing working relationship between the client and outsourcing service providers.
There can be various reasons behind outsourcing, like:-
# Low cost.
# Improved quality.
# Access to wider experience & knowledge..
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